2003 (5) TMI 40 - HC - Income Tax

Kar Vivad Samadhan Scheme - appellant in order to evaluate the benefits of the Scheme filed a declaration under section 88 of the Scheme on December 3. 1998 before the Commissioner of Income-tax Karnataka-II Bangalore the first respondent herein who is the designated authority under the Scheme. The first respondent passed an order in Form No. 2A on December 22 1998 under section 90(1) of the Scheme and determined the tax and the interest payable by the appellant - we do not find any merit in this writ appeal. It is accordingly dismissed

Issues Involved:
1. Valuation of construction costs.
2. Application of Kar Vivad Samadhan Scheme (KVSS).
3. Adjustment of self-assessment tax under section 140A.
4. Interpretation of the Scheme vs. the Income-tax Act.
5. Entitlement to benefits under the Scheme.

Detailed Analysis:

1. Valuation of Construction Costs:
The appellant, a regular income-tax assessee, constructed a choultry named "AGN Kalyana Mantapa." The appellant's registered valuer estimated the construction cost at Rs. 60,68,000, while the Income-tax Departmental Valuer estimated it at Rs. 1,03,96,000. The appellant declared a total income of Rs. 20,65,000 for the assessment year 1994-95, including voluntary disclosure of income under section 69B of the Income-tax Act, 1961.

2. Application of Kar Vivad Samadhan Scheme (KVSS):
The Finance (No. 2) Act, 1998, introduced the KVSS, allowing assessees to pay 30% of the disputed income as tax, with waivers on interest and penalties. The appellant filed a declaration under section 88 of the Scheme, but the Commissioner of Income-tax determined the payable tax and interest, setting off the self-assessment tax paid by the appellant against the interest demand.

3. Adjustment of Self-Assessment Tax under Section 140A:
The appellant contended that the self-assessment tax should be adjusted against taxes and not interest. The learned single judge dismissed the writ petition, holding that the Scheme does not contemplate adjustments of the amount paid under section 140A of the Act.

4. Interpretation of the Scheme vs. the Income-tax Act:
The appellant argued that the Scheme should override the provisions of the Act, including section 140A. The court examined the relevant provisions of the Scheme and the Act, including the Explanation to section 140A, which mandates that any shortfall in payment should first be adjusted towards interest and then towards tax.

5. Entitlement to Benefits under the Scheme:
The court referred to the definitions of "disputed income" and "disputed tax" under the Scheme, concluding that the self-assessment tax paid by the appellant under section 140A could not be regarded as "disputed tax." The court also considered judgments from other High Courts, reinforcing that the Scheme benefits apply only to disputed tax arrears and not to admitted tax.

Conclusion:
The court dismissed the appeal, holding that the self-assessment tax paid under section 140A could not be readjusted under the Scheme. The court emphasized that the Scheme does not provide for adjustments of amounts paid under section 140A and that the appellant was not entitled to the benefits of the Scheme for the self-assessment tax paid.

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